Annual CGT exemption and new Stamp Duty Land Tax rates

News: January 2015

Annual CGT exemption and new Stamp Duty Land Tax rates

This is set to be £11,100 in 2015/16, so is worth a useful £3,108 for higher rate taxpayers for whom the 28% rate applies.

CGT on non-residents disposing of uk residential property

Following consultation during Summer 2014, the Government is proceeding with the introduction of a capital gains tax charge from 6 April 2015 on non-residents disposing of UK residential properties. Such individuals will not be able to treat the property as their Principal Private Residence, and thus are potentially exempt, unless there are substantial periods of residence in the property. The proposal is that the individual must spend 90 nights there each year to qualify for the relief, however we await further details.

Good news for most homebuyers!

Stamp Duty Land Tax (SDLT) has often been referred to as a “slab” tax as there are significant increases in the tax payable at the £250,000 and £500,000 price points causing a cliff edge effect and distortions in the property market. This was particularly relevant around £250,000 as at that purchase price the rate went up from 1% to 3%, which meant £2,500 if the purchase price was £250,000 but an extra £1 meant a further £5,000 SDLT was payable.

Where residential property is purchased from 4 December 2014 onwards, the rates will be as follows.

Purchase Price SDLT rate Cumulative
Up to £125,000 NIL NIL
£125,001 – £250,000 2% £2,500
£250,001 – £925,000 5% £36,250
£925,001 – £1,500,000 10% £93750
£1,500,001 and over 12%

The Government considers that this will create a much fairer system and those buying residential property up to £937,500 will pay less SDLT, about 98% of all purchasers.

For example, where the purchase price is £275,000 (the average price of a family home) the SDLT reduces from £8,250 to £3,750. This is 2% on £125,000 to £250,000 = £2,500 plus 5% on £250,000 to £275,000 = £1,250.

The new rules apply to transactions on or after 4 December 2014 but if you’ve already exchanged on a property you’ll have a choice about whether to use the old or new rules.

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